Guinness to Buy Largest Brewer in Spain

By STEVEN PROKESCH, Special to The New York Times

Published: November 22, 1990

LONDON, Nov. 21—
Guinness P.L.C. announced plans today to buy the largest brewer in the fast-growing Spanish market for $1.02 billion. Analysts said the deal reflected the growing interest of multinational beverage companies in regional European brewers.

Guinness, the London-based beverage giant, said it had agreed to buy La Cruz del Campo S.A., based in Seville, which holds 22 percent of the Spanish beer market and is the country's fastest-growing and most profitable brewer. The acquisition would be the second biggest for Guinness, after its $4.1 billion purchase in 1986 of the Distillers Company, a spirits concern.

Guinness said it had agreements to buy more than 50 percent of the shares of the Spanish brewer, known as Cruzcampo, from its major shareholders, including the Stroh Companies, the American brewer that owns 28 percent of Cruzcampo and 30 percent of a Cruzcampo subsidiary.

After those purchases are approved at a meeting of Cruzcampo shareholders, Guinness said, it plans to make a tender offer for the rest of the shares. It hopes to complete the purchase in January.

Guinness, now the world's 17th-largest brewer by volume, said the acquisition would move it to No. 12; it said it would jump to No. 4 from No. 6 in terms of operating profits.

Guinness had a pretax profit of $1.11 billion on sales of $4.95 billion last year. Besides its beer and spirits operations, Guinness holds a 24 percent stake in LVMH Moet Louis Vuitton S.A., the French spirits and luxury-goods company.

Last year, Cruzcampo, which has six breweries, had pretax income of about $114 million on sales of $466 million based on current exchange rates.

At the moment, the vast majority of Guinness's brewing profits come from Britain and Ireland, although it sells its beers in 120 countries. Last year, Guinness Brewing Worldwide earned $199.6 million before interest and taxes on sales of $1.72 billion.

Michael McCarthy, an analyst at Smith New Court Securities P.L.C. in London, expects the brewing unit's profits to increase by 26.6 percent, to $309.1 million this year, excluding Cruzcampo. Several Brands

Guinness's flagship brand is Guinness Stout, a dark brew. Its other brands include Guinness Gold and Harp, both lager, or aged, beers; Kaliber, a non-alcoholic beer, and Smithwicks ale.

During the last decade, per capita consumption of beer in Britain and Ireland has been falling. But the market in Spain has been growing at about 4 percent annually, and it is now the ninth largest in the world and the second largest in Continental Europe, behind Germany.

Noting that his company has only a limited presence on the Continent, Anthony Tennant, chairman of Guinness, said, "The acquisition of Cruzcampo provides Guinness with a key strategic base."

Other multinational brewers, including Interbrew, the Belgian company; the Anheuser-Busch Companies, the largest United States brewer, and John Labatt Ltd., the Canadian brewer and food company, also wooed Cruzcampo, said David Fleming, the London-based managing editor of Impact International, a beverage industry magazine.

Big multinational companies that already own stakes in major Spanish brewers include Heineken N.V., the Dutch concern; France's BSN Groupe, and Carlsberg A/s-Koncern, the Danish company. Shopping on the Continent

"There's a lot of shopping around for Continental regional breweries" by multinationals "who like the idea of having production capacity on the Continent," Mr. Fleming said. Multinationals are also interested in joint ventures in production, marketing and distribution, he added.

In the last four years, Guinness has entered into a spate of joint ventures in Europe and East Asia with companies like Anheuser-Busch, Heineken and BSN.

"Guinness's unique strength is that their flagship brand is a stout," which complements rather than competes with other brands, Mr. Fleming said. "That has enabled them to link up with a lot of international partners."

Mr. McCarthy, the analyst, said the price being paid for Cruzcampo, about 13 times earnings, was "an extremely good one" for Guinness.

Part of the interest in the regionals stems from the 12-nation European Community's program to turn itself into a single, barrier-free market by the end of 1992. By making it easier to manufacture, market and distribute on a pan-European basis, the program is causing companies in many industries to seek economies of scale.